Making money

What the experts say

An app to stop overdrafts

A startup “wants to help make those ridiculous overdraft penalties a thing of the past,” said Steven Melendez in FastCompany.com. Dave, a smartphone app backed by billionaire investor Mark Cuban, syncs with users’ bank accounts and warns them when they’re in danger of overdrawing by analyzing their spending habits and recurring expenses. The app will even provide interest-free loans of up to $250 to keep bank charges at bay, though there is a $3 transfer fee. The loan is then repaid automatically on the next payday. Dave uses machinelearning algorithms to make sure users have the ability to repay a loan before it offers them one, analyzing several months of income history. That data also lets Dave predict “when users might need a loan,” giving them a chance to trim discretionary expenses.

Trading student debt for home debt

Fannie Mae is making it easier for people with student loan debt to buy a home or refinance a mortgage, said Ann Carrns in The New York Times. The government-controlled mortgage giant “is expanding its cash-out mortgage refinance option, which lets borrowers trade highrate student loan debt for lower-rate home loans.” The program, which Fannie Mae tested with online lender SoFi last year, will now be available through all 1,800 of its lenders. Fannie Mae will also start allowing borrowers to exclude debt being paid by others, like student loans being paid off by a parent or employer, from their mortgage applications. It will also change how it considers borrowers who are on flexible payment programs. Both moves should improve borrowers’ debt-to-income ratio, making them more likely to qualify for a mortgage.

IRAs aren’t working as intended

A new study suggests that IRAs mostly help the people “who need them the least,” said Lauren Weber in The Wall Street Journal. Individual retirement accounts were created by Congress more than 40 years ago to give workers without employer-sponsored programs access to tax-advantaged retirement savings plans. Of the 14 percent of Americans who put money into IRAs in 2011, 53 percent also had an employer-sponsored 401(k), according to the Center for Retirement Research at Boston College. And the vast bulk of the $7.8 trillion held in IRAs in 2016 came from rollovers of 401(k)s. With IRA investors having average household earnings of $110,000, the study’s authors conclude that the accounts are “barely serving lower-income families.” ■